Dollar blamed for falling business conditions

Georgia Wilkins

Conditions for businesses worsened in September, driven down by a high Australian dollar and weaker commodity prices on the back of global conomic uncertainties. The National Australia Bank's monthly business condition index fell to minus-3 in September from a reading of 0 in August.

"The pull back in business conditions was led by particularly heavy declines in wholesale, retail and transport & utilities," it said, with conditions falling heavily in Victoria and South Australia.

NAB's overall trading sub-index fell to minus-3 in September from 3 in August, while the profitability index dipped to minus-5 from minus-2 in August.

Weakness in the global economy pushed the Reserve Bank last week to slash its cash interest rate by 25 basis points to 3.25 per cent — the lowest since late 2009, warning that the prospects for Chinese growth have become more uncertain while European economic activity is likely to keep deteriorating.

The NAB survey said overall business confidence remained low – particularly in mining and manufacturing — but has shown some signs of a recovery.

"While overall sentiment remains fairly downbeat, announcements of further policy stimulus in major international economies over the past month, which have supported equity and commodity prices more recently, appear to have helped alleviate some of the pessimism harnessed by businesses."

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Although mining conditions were unchanged in September, they failed to recover from a sharp decline in August.

‘‘The relative weakness in mining activity of late has reflected the weakened outlook for global commodities demand and concerns about global (and especially Chinese) growth.’’

It said conditions had weakened most in industries exposed to consumer sentiment.

‘‘The largest falls in conditions in the month were in wholesale (down 13), retail (down 10) and transport & utilities (down 7).’’

Confidence had improved moderately in manufacturing and mining, but they remained the most pessimistic industries overall.